Question

    Which of the following ratio is useful in evaluating

    credit and collection policies?
    A Average payment period Correct Answer Incorrect Answer
    B Current ratio Correct Answer Incorrect Answer
    C Average collection period Correct Answer Incorrect Answer
    D Inventory turnover ratio Correct Answer Incorrect Answer
    E Quick ratio Correct Answer Incorrect Answer

    Solution

    The average collection period is used as an accounting measure to symbolize the avg. No. of days among a credit score sale date and the date whilst the customer remits payment. An entity’s average collection period indicates the effectiveness of its Accounts Receivable (or Trade Receivables) Management.

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